TD Ameritrade Holding Corp. said Tuesday that its fiscal third-quarter profit rose 22 percent as it handled more trades and collected more asset-based fees.
Its shares rose two percent but executives warned that current low interest rates will continue to restrict the growth of asset-based revenue in the near future.
TD Ameritrade makes money by charging fees to handle trades and hold clients’ assets. That means it will benefit if interest rates rise.
The Omaha, Nebraska-based company said it earned $240 million, or 45 cents per share in the April-June period. That’s up from $197 million, or 36 cents per share, a year ago.
This year’s quarter included a gain of six cents per share on a tax adjustment. Excluding that, earnings came to 39 cents per share. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of 38 cents per share.
The online brokerage posted revenue of $838 million in the period. Seven analysts surveyed by Zacks expected $828.3 million.
The company’s quarterly results were encouraging even if its revenue growth was slower than some peers, said S&P Global Market Intelligence analyst Cathy Seifert. She recommended buying the stock and noted that rising interest rates will eventually provide a boost.
TD Ameritrade is preparing for the retirement of CEO Fred Tomczyk this fall. His successor, Tim Hockey, said investors shouldn’t expect many changes.
“I see nothing but upside potential in terms of continuing on the strategy,” said Hockey, who has been serving as president.
The company plans to release a fully automated version of its Amerivest advising software next year to fill a gap in its products.
Hockey said TD Ameritrade hopes to attract a significant share of the investment money that’s likely to be displaced as firms work to comply with a new federal rule requiring financial advisers to put their clients’ best interests above all.
During the quarter, the British vote to leave the European Union sparked market volatility that boosted trading, but Hockey said some long-term investors remain uneasy.
“Results this quarter reflected mixed investor sentiment. Long-term investors expressed some reticence to move new money, while traders increased their equity exposure,” Hockey said. “Both segments were opportunistic, using events like the historic Brexit vote, to lean into the market decline.”
TD Ameritrade shares rose 68 cents, or 2.3 percent, to close at $29.93 Tuesday. The shares are down more than 22 percent in the last 12 months.